Sourcing structures and the execution efficiency of information technology projects: A comparative evaluation using stochastic frontier analysis

In the pursuit of low-wage labor and access to technical talent, information technology (IT) projects today are often executed with sourcing structures that span the boundaries of a firm, a country, or both. Although the strategic implications of sourcing structures have received considerable attention in theory and practice, their implications from a project execution standpoint-specifically, in terms of execution efficiency-remain under-researched. Based on a large primary dataset on IT projects with distributed sourcing structures, this paper documents the findings of a theoretically grounded, empirical investigation using stochastic frontier analysis that evaluates whether and to what extent does the execution efficiency of projects vary across various types of sourcing structures (namely, Domestic-Insourcing, Domestic-Outsourcing, Offshore-Insourcing, and Offshore-Outsourcing). The results provide support for differential effects of crossing a firm or country boundary, or both boundaries, on the execution efficiency of IT projects. Specifically, we find that the execution efficiency of IT projects is significantly lower when their sourcing structures cross a country boundary (Offshore-Insourcing and Offshore-Outsourcing) relative to when their sourcing structures do not cross a country boundary (Domestic-Insourcing and Domestic-Outsourcing). Notwithstanding these trends across sourcing structures, a split-sample analysis of execution efficiency levels reveals that each structure presents a viable alternative for managers to realize high levels of execution efficiency. Finally, additional analysis highlights the benefits of sourcing structure capabilities-as represented by the extent of risk management planning and agile project management-in improving execution efficiency in IT projects that cross a country boundary.